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Shell was squeezed out of the Sakhalin-2 project precisely five years ago

By Motley Fool Staff Posted 9:58PM 11/03/11


Last week, my Foolish colleague Alex Planes wrote a superb article offering the conclusion that “Cheap Oil Isn’t Coming Back,” an assessment with which I completely agree. Beyond that, though, I’d add, “And Cheap Gas Has a Brief Future, Too.” With that in mind, it’s crucial to look back at the recent earnings season to garner what we can about which major oil companies appear to offer the biggest boosts for our portfolios.

Shell’s full of LNG
Royal Dutch Shell also doubled its earnings in the past quarter, chalking up a growth rate that one advertisement used to refer to as “a silly millimeter” beneath Chevron’s. The company is casting a major lot with LNG, where it leads the world in production and distribution. That’s a sufficient reason for placing the Anglo-Dutch giant next to Chevron as another member of Big Oil’s most promising trio.

As an indication of the potential in natural gas — obviously including LNG — Shell’s gas earnings jumped by a whopping 40% outside the Americas, while they eked out just a 1% increase in this part of the world. A large part of that massive differential stemmed from the fact that gas is sitting near a paltry $4 in the U.S., while it yielded $15 for Shell in Asia. That being the case, should we deny that the U.S. price is headed for higher ground? Indeed, Asia’s levies appear to be headed even higher.

And then there’s Russia. Several years ago, I began a Motley piece with the observation, “Only a few things are absolutely inevitable in today’s world: death, taxes, and the Russian government’s lusting after energy projects once they’ve been developed by Western companies.” For instance, you’re probably aware that Shell was squeezed out of the operatorship of the country’s Sakhalin-2 project precisely five years ago.

I’m not certain of Shell’s likely future with the Russkies, since, with the world running low on potential major oil finds, the Western companies have displayed a curious tendency of dusting themselves off after having been body-checked by Vladimir Putin’s minions and heading right back into the game.

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